C.I.

Holdings
Recommendation: BUY
Stock Code: 2828 Bloomberg: CIH MK Price: MYR2.88 12-Month Target Price: MYR3.80 Date: August 27, 2010

Board: Main Pr ice 30 Day Moving Aver age Pr ice ( MYR)

3.50
Sector: Consumer Products 3.00

GICS: Consumer Staples/Soft Drinks 2.50

Market Value - Total: MYR409.0 mln 2.00

1.50

Summary: C.I. Holdings (CIH) is primarily engaged in 1.00

bottling, selling and distribution of beverages, and 0.50

manufacturing and trading of tap and sanitary ware.
Vol ume Vol ('000)
Analyst: Chok Wai Lee, CFA 4,000
3,000
2,000
1,000
0
Aug 07 Nov 07 Jan 08 Mar 08 May 08 Jul 08 Oct 08 Dec 08 Feb 09 Apr 09 Jul 09 Sep 09 Nov 09 Jan 10 Mar 10 Jun 10 Aug 10

Results Review & Earnings Outlook Recommendation & Investment Risks

• CIH posted FY10 (Jun) net profit of MYR38.2 mln (+82.0% YoY). The
earnings were above consensus and our expectations. The main
variances were the higher-than-expected revenue from its beverages
division and lower-than-expected tax expense.
• CIH’s beverage division registered revenue of MYR479.9 mln (+46.4%
YoY) in FY10. The strong growth was mainly due to continued growth
in its non-carbonated portfolio (such as Tropicana and Lipton) and
successful selling campaigns. In addition, the group has successfully
expanded its distribution coverage to 42,000 outlets (from 35,000
outlets) in FY10.
• More positively, CIH’s pretax margin has improved to 9.3% in FY10
(FY09: 7.7%) due to a better sales mix (a shift to more profitable
brands and packages), prudent cost management and increased
economies of scale.
• CIH has signed an exclusive bottling agreement to renew the
franchise bottling rights for the manufacture and sale of PepsiCo’s
(PEP US, USD64.13, 4-STARS) beverage brands in Malaysia for the
next ten years. We are positive about this as it shows PepsiCo’s
confidence in CIH’s long-term prospects.
• We raise our earnings forecast for FY11 by 18.1% to MYR43.6 mln,
taking into account the better-than-expected results. We also
introduce our FY12 net profit estimate of MYR49.2 mln.
• We maintain our Buy recommendation with a higher 12-month target
price of MYR3.80 (from MYR2.50), following our earnings upgrades.
• We have changed our valuation methodology to relative PER valuation
(from DCF) to reflects CIH’s resilient earnings growth. Our target price
is based on assigning a 12.5x PER multiple on our estimated FY11
EPS, a 20% discount to CIH’s peers. We believe the discount is
justified as CIH has a smaller market capitalization.
• Given CIH’s significant growth in the past, its current in-house
warehouse capacity is not sufficient for its daily operations. As a result,
the group has proposed to purchase a piece of land (comprises an
existing warehouse with built-up area of 252,458 sq ft and 426,594 sq
ft of vacant land) in Bangi for MYR29.5 mln. In our view, this move
should help CIH reduce its logistics costs going forward, as it now uses
third party warehouses to satisfy its needs. Long-term prospects for
CIH remain promising, as its new production line for non-carbonated
beverages is coming on stream soon in September.
• Risks to our recommendation and target price include higher-than-
expected raw material and packaging costs (like aluminum and
corrugated cartons), increased competition from other beverage
products, and slower-than-expected consumer spending, which would
affect demand for its products.

Key Stock Statistics Per Share Data

FY Jun. 2010 2011E FY Jun. 2008 2009 2010 2011E
Reported EPS (sen) 26.9 30.7 Book Value (MYR) 0.80 0.93 1.14 1.35
PER (x) 10.7 9.4 Cash Flow (sen) 20.2 26.1 43.6 49.6
Dividend/Share (sen) 11.0 12.0 Reported Earnings (sen) 11.2 16.2 26.9 30.7
NTA/Share (MYR) 0.80 1.02 Dividend (sen) 4.0 7.0 11.0 12.0
Book Value/Share (MYR) 1.14 1.35 Payout Ratio (%) 26.7 35.5 30.7 29.3
No. of Outstanding Shares (mln) 142.0 PER (x) 25.7 17.8 10.7 9.4
52-week Share Price Range (MYR) 1.20 - 3.07 P/Cash Flow (x) 14.3 11.0 6.6 5.8
Major Shareholders: % P/Book Value (x) 3.6 3.1 2.5 2.1
Datuk Johari Bin Abdul Ghani 25.4 Dividend Yield (%) 1.4 2.4 3.8 4.2
SISMA Group 20.0 ROE (%) 15.0 17.7 26.0 24.6
Continental Theme Sdn Bhd 10.4 Net Gearing (%) 63.8 29.0 33.6 42.2
*Stock deemed Shariah compliant by the Securities Commission.

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 C.I. Holdings
Recommendation: BUY
Stock Code: 2828 Bloomberg: CIH MK Price: MYR2.88 12-Month Target Price: MYR3.80 Date: August 27, 2010

Quarterly Performance
FY Jun. / MYR mln 4Q10 4Q09 % Change
Reported Revenue 140.4 95.9 46.4
Reported Operating Profit 13.6 11.5 18.1
Depreciation & Amortization NA NA NA
Net Interest Income / (Expense) NA NA NA
Reported Pre-tax Profit 13.1 10.4 25.5
Reported Net Profit 11.4 7.3 55.8
Reported Operating Margin (%) 9.7 12.0 -
Reported Pre-tax Margin (%) 9.3 10.9 -
Reported Net Margin (%) 8.1 7.6 -
Source: Company data

Profit & Loss

FY Jun. / MYR mln 2009 2010 2011E 2012E
Reported Revenue 363.0 516.4 603.9 689.9
Reported Operating Profit 32.8 51.3 59.8 67.9
Depreciation & Amortization -12.8 -21.1 -26.9 -24.4
Net Interest Income / (Expense) -4.9 -3.2 -3.7 -3.8
Reported Pre-tax Profit 28.0 48.1 55.8 63.9
Effective Tax Rate (%) 25.3 20.8 22.0 23.0
Reported Net Profit 21.0 38.2 43.6 49.2
Reported Operating Margin (%) 9.0 9.9 9.9 9.8
Reported Pre-tax Margin (%) 7.7 9.3 9.2 9.3
Reported Net Margin (%) 5.8 7.4 7.2 7.1
Source: Company data, S&P Equity Research

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Recommendation and Target Price History P rice (M YR)

Date Recommendation Target Price 3.5
New Buy 3.80
22-Apr-10 Buy 2.50
3.0
1-Feb-10 Not Ranked
28-Jan-10 Buy 2.00
4-Nov-09 Buy 1.80 2.5
27-Aug-09 Strong Buy 1.70
27-Apr-09 Buy 1.30 2.0
23-Jan-09 Hold 1.10
4-Nov-08 Hold 1.03
26-Nov-07 Hold 1.12 1.5

1.0

0.5
Aug 07 Nov 07 Feb 08 May 08 Aug 08 Nov 08 Feb 09 May 09 Aug 09 Nov 09 Feb 10 May 10 Aug 10

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